What will Brexit mean for the international shipping community choosing English law and jurisdiction?

English law, and the jurisdiction of the English courts or arbitration in England, remains the most frequent choice for parties throughout the shipping industry.

On Friday 8 December 2017, the UK and the EU announced that “sufficient progress” had been made in the first phase of Brexit negotiations, paving the way for discussions to shift to the UK’s future relationship with the EU. As attention turns to the post-Brexit landscape, there has been considerable speculation about the potential implications for English law. The concerns of some that the uncertainty caused by Brexit could have consequences for the use of English law in international contracts, was recently powerfully rebutted by the English Court of Appeal Judge Lord Justice Hamblen, in a speech entitled “Myths of Brexit”.

We are of the same opinion as Lord Justice Hamblen. Irrespective of the outcome of negotiations between the UK and the EU, it is our view that the UK’s pre-eminent role as an international dispute resolution centre will be unaffected. English law and jurisdiction will continue to be an attractive choice for commercial parties engaging in cross-border transactions and London will remain a global arbitration hub.

Use of English law

English law is the governing law of choice for many international businesses when entering into commercial contracts. Its attractiveness stems from a number of features:

Certainty: Businesses require certainty and clarity when engaging in cross-jurisdictional commercial activity and English law, with its independent judiciary and established legal precedent, can provide this.

Flexibility: The commercial landscape is in a constant state of change. English law is not restricted by a written code and is instead able to adapt to new developments in the business world.

 Commerciality: English law recognises “freedom of contract” and will aim to give effect to the contractual intention of commercial parties.

Businesses value the commerciality of the English courts, in contrast to the overly legalistic approach of other jurisdictions.

After Brexit, English law will retain these key characteristics. The UK’s membership of the EU has had very limited impact on English contract law, which is mainly derived from the common law, and there will be little change in this area of law once Brexit takes effect – as Lord Justice Hamblen eloquently puts it, “the river of the common law of contract will flow on regardless.”

Businesses should also be confident that EU member states will continue to respect English governing law clauses, irrespective of the nature of the UK’s future relationship with the EU. Under the Rome I Regulation, EU courts are required to give effect to governing law clauses – even if that clause specifies the laws of a non-member state. Further, the UK Government has confirmed that the principles of Rome I (and II, which governs non-contractual relations, i.e. tort/delict) will be incorporated into English domestic law.

Enforcement of English jurisdiction clauses and English judgments

There has been some discussion about the post-Brexit regime for the enforcement of exclusive English jurisdiction clauses and English judgments in the EU. Upon Brexit, the Recast Brussels Regulation, which provides for the mutual recognition and enforcement of jurisdiction clauses and civil judgments between EU member states, will cease to operate in relation to the UK.

However, in a position paper published earlier this year, the UK Government signalled its intention to agree a “close and comprehensive framework of civil judicial cooperation with the EU…which would mirror closely the current EU system”. While this is subject to negotiation, it is in the interests of both parties to agree to such a framework.

The UK Government has also stated that it intends to sign up to the 2005 Hague Convention, which provides for the recognition and enforcement of exclusive jurisdiction clauses by all parties (including the EU), and the 2007 Lugano Convention, which extends the Brussels regime to EFTA contracting states. The UK is, of course, already a party to these agreements by virtue of its membership of the EU. Significantly, the UK does not require the assent of the EU or other Convention states to accede to the Hague Convention. Even in the absence of a reciprocal agreement between the UK and the EU, which would be a worst-case scenario, the UK’s accession to the Hague Convention will deal with the principal concerns of businesses seeking to agree English exclusive jurisdiction clauses and enforce English judgments in the EU.

Arbitration

The pre-eminent position of London as a global arbitration centre, particularly in international maritime arbitration, will most likely be unchanged after the UK’s withdrawal from the European Union. Brexit will have no effect on arbitration clauses in contracts governed by English law and EU rules are not applicable in respect of the jurisdiction and enforcement of arbitral awards. Arbitral awards will remain enforceable across the EU by virtue of the 1958 New York Convention, to which all EU member states, including the UK, are parties in their own right.

Comment

Despite recent progress, there is still a long way to go in the Brexit process. Much remains uncertain, particularly in view of the political landscape on either side of the English Channel. However, it is encouraging that the leadership in both the UK and the EU appear to recognise the significance of continued judicial cooperation after Brexit. This, together with the fact that the existing advantages of English law and jurisdiction should be unaffected by the UK’s withdrawal, should provide considerable reassurance to businesses. We are confident that the UK will retain its position as the leading international dispute resolution centre for parties in the shipping industry for many years to come.Source: Ince & Co

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